Ask HN: Why is everybody copying layoffs? | Hacker News Reader

Ask HN: Why is everybody copying layoffs?

79 pointsindus132 comments

Google: 12000

Microsoft: 10000

Amazon: 18000

Meta: 11000

Twitter: 4000

Salesforce: 8000

200,000+ laid off in tech since the beginning of 2022.

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When everyone is doing it, companies see it as an opportunity to trim down the fat they have accumulated during the good times.

There's no stigma for them doing it if everyone else is.

If they lay people off in good times, then that is a serious indication of trouble at the company.

If they lay people off in bad times then that is an indication of wisdom and prudence.

I've seen it in multiple recessions.

> I've seen it in multiple recessions.

What's interesting here is that, in the face of all the fears about a recession, no recession actually seems to be happening

yep. It's just a bunch of lemmings.

Or companies that did not do performance related reduction are finding now is the time

The more removed the financial and tech world is from the rest of the economy the more they cloud reality by distorting GDP figures. We may not be in a recession but everyone I know has more difficulty paying for things and a more negative economic outlook than they ever did in '09.

While some economic indicators are bad already, the real issue is core inflation not giving up.

The Fed has already signaled it will keep hiking rates until the economy slows down and inflation is controlled. As an entrepreneur/CFO, would you bet against the Fed?

> While some economic indicators are bad already, the real issue is core inflation not giving up.

Inflation was negative last month. Core CPI was above zero, though (0.3%).

https://www.bls.gov/cpi/latest-numbers.htm

This might have a measurable effect though, basically 200K+ workers kicked out of the industry, and the fear of a second round for the remaining workers. That is a some serious belt-tightening there. If it feeds into other less progressive industries, it might well help (which I suspect is the whole impetus behind it, at least the coordination suggests so).

You have to remember that these companies have access to metrics that aren’t public yet. They can monitor sales day to day.

Wait until Q4 results come out. If companies like google have seen a drop in Q4 advertising revenue (unsurprising since it’s often an expense that gets cut first), they may be trimming headcount before the downturn in revenue is even made public.

To extend that, if a CEO bucks a trend like that, and then the company's profits appear to suffer as a result, then stockholders will be unhappy, and the CEO may lose their bonus, or worse.

Just to point out that there are often personal implications for the powers that be, if the stockholders feel that mistakes were made.

I hear arguments like this on HN all the time. This seems similar if not the same as, "CXO has a fiduciary duty to <do something terrible>".

How often do execs actually get punished for _not_ doing something terrible? I never seem to hear about cases where they are held responsible for not following fiduciary duty. I only seem to hear it brought up as a justification for shitty behavior.

I'm not trying to say it doesn't happen. I'm genuinely curious.

How would you know what people didn’t do? Seems hard to measure.

I don't know how often that happens.

But anyway in my case I didn't say it was their duty, I was talking basically about the psychology.

From this angle, it's about whether they think that shareholders will/might think they made a mistake, not about whether they actually made the best judgement for the company.

I have no doubt that at least some CEOs will absolutely choose to do something that they privately believe is not optimal for the company, when they think shareholders will see things differently.

The converse of this is seen when a politician does something out of principle that they know will get them in trouble with voters. We have plenty of evidence that that happens -- and that it's on the rare side.

Layoffs aren't something terrible. They're part of business.

Sure it's not ideal but it does happen.

I don't get why people react emotionally to it as though the company is question is evil.

Being layoff is a terrible experience and is one of the most stressful times in your life

One study found that being laid off ranked seventh among the most stressful life experiences — above divorce, a sudden and serious impairment of hearing or vision, or the death of a close friend. Experts advise that it takes, on average, two years to recover from the psychological trauma of losing a job.

For healthy employees without pre-existing health conditions, the odds of developing a new health condition rise by 83% in the first 15 to 18 months after a layoff, with the most common conditions being stress-related illnesses, including hypertension, heart disease, and arthritis. The psychological and financial pressure of being laid off can increase the risk of suicide by 1.3 to 3 times. Displaced workers have twice the risk of developing depression, four times the risk of substance abuse, and six times the risk of committing violent acts including partner and child abuse. The stress induced by a layoff can even impair fetal development.

10 years ago I was put at risk of redundancy with the rest of my team. I was ultimately fortunate to keep my job and was told later I was never at risk, they just had to include the whole team for some HR reason. However due to the stress at the time both my mental health and physical health (IBS) hasn't been the same since.

In general sure. In specific they are terrible. En masse they are even worse. Not only did someone lose their job, there are now an additional 199,999 other people competing for the jobs that are still out there.

They are terrible for everyone involved.

- Terrible for those who lose their jobs and lifelihood - Terrible for those who in the process lose their visa/life they know - Terrible for those remaining as they are anxious to be next - Terrible for the company as the best people will now look for a job elsewhere (before the axe hits them) - Terrible for the company as anxiety leads to less effective employees

Execs don't get punished at all because of the collusion between boards of directors and executives. This collusion comes into being because both directors and execs belong to the same class. This is not the case with others (the relationship between execs and middle mgmt, between middle mgmt and worker bees).

Thanks to the dominance of mega index funds and pension funds, there is no way to rein in on boards of directors. Activist investors can control a bit. Remember the fight between Carly Florina and her hand-picked board on one hand and Walter Hewlett on the other hand about HP and Compaq merger.

We'll see if that happens to Apple. But to be fair to your point, they're so often an exception to trends that they're the perpetual outlier.

Study claiming as such: https://news.stanford.edu/2022/12/05/explains-recent-tech-la...

Shareholders really want them as a copycat maneuver.

I’m not saying this IS happening, but there’s a potential tin-foil hat angle here too. There was quite a bit of job hopping and increased wages going on before 2022. A little RIF by everyone has a chilling effect on people looking to leave. People prefer stability when times are tough. And cutting total number of available positions across the industry can have the effect of suppressing wages.

Again, I have no reason to believe this is happening, but it IS a potential motive.

It is not a conspiracy. Many companies do actually lay off a number of senior employees in downturns and rehire less experienced employees at a cheaper rate (taking into factor experience).

Bingo, if there are going to be layoffs, now is the time to do it because the narrative is the economy is fucked.

and hopefully narrative gets lost in the sea of Glassdoor reviews

Then why hire when you are so desperate to 'trim down the fat'.

The firings aren't performanced based. So really all you're doing is reducing so you can waste billions on hiring again in 2025.

Because it is very hard to fire someone underperforming. You need to hire people to get stuff done. To fire people, you either need to build 1 year of paper trail or wait for the next signs of recession.

These companies are sitting on cash, they are expected to hire and use that cash to grow revenue. The last decade of free money made many companies irresponsible and bloated.

> If they lay people off in good times, then that is a serious indication of trouble at the company.

I used to work at Amazon from 2001-2006 and every single year there was a round of layoffs of several percent after the annual 360 degree review nonsense was completed. That was part of the whole "topgrading" nonsense to keep negging all the rest of the remaining employees.

Did they actually have to stop doing that, or is this whole "nobody ever did layoffs in tech up until this year" narrative something invented in the past few months?

Growth stage startup CEO here. At the end of last year our board meeting was a pitch from outside investor director to founders recommending a 50-75% layoff, despite several years of runway. The capital class is despondent that the stock market has melted, and the solution is to pull the ladder up and nurse wounds. In my opinion, companies are all responding with their own values informed version of what their financial stakeholders have been urging them increasingly to do.

How big is your startup

So if you have to do, would it be 10% a few quarters or go for the full blow in a single shot

I’m not op, but I say do it all in one shot. I worked at Iomega in the 90’s and it felt like they had a layoff every quarter, which was toxic. The company was on fire, however, so maybe that’s different.

iomega reminds me of those lovely diskettes

Exactly.

The financials aren't actually telling these companies to lay people off; the shareholders are. The macroeconomic climate is very different than the microeconomic climate; the microeconomic climate for most of these companies is "slow expansion", not "contract". In fact, many of them are still hiring even as they're laying people off because of that. But the shareholders are very much concerned, and so this is much more of a response to that.

Not really. The shareholders are being forced by the FED. None of the investments they made make sense at this interest rate level, so they want out. However ...

The theory behind the moves of the FED is that they want inflation down. How? By firing people (people will only pay prices they can afford). The FED can't fire much people. So if shareholders want the FED to back down ... they need enough people fired.

And that doesn't really work because we are fundamentally tight on the labor market for 4+ years now. Nobody fired is going to have trouble finding a new job. Maybe not the same, but they won't exactly be unemployed (although given the wages offered unemployment might be the preferable option).

It's not shareholders, it's Jerome Powell.

It's also just not going to last. The Federal government is looking at two options, in ~1.5 years. Cutting spending by 4% (and one year after that, >10%) with LESS income. Or convincing "independent" Jerome Powell to lower interest rates back to 0%.

So we'll have, let's call it 2 years of this. The FED will be as effective as an inflatable dart board, but they only have ONE tool and goddammit, they will make it work!

Another anecdote, a company i used to work for (200+) employees, in high growth mode but not yet profitable got told the same by their investors. “Save cash, layoff staff, raising is going to be more difficult”

So they terminated 40% of their staff despite the growth basically because investors are very pessimistic.

Was that company able to continue growing post layoffs?

Yes this is another instance of the financial tail wagging the economic dog.

Our economy has become completely over-financialized, and in this situation the fed have decided that inflation needs to be contained, and are inducing a recession to do it. They can do this quite reliably because of the level of financialization, companies are in debt to the hilt even if they don't need to be (it's because shareholder value), etc.

Bull markets and a strong financial situation usually pushes companies to overhire or over estimate the number of employees they do actually need. I have seen clients I worked with and we have advised 75% layoffs multiple of times. This is especially true in the dev teams.

It's interest rates. Capital is becoming more expensive.

If you are a good CFO, you say:

"Hey remember how we want 5 years of cash, well i just looked at selling bonds and getting cash now is expensive." For tech companies the biggest expense is salaries, so saving cash means firing people.

For the smaller companies they aren't getting investments as easily or at all. They will also need to save cash.

The next few years are going to be different.

Interest rates: https://fred.stlouisfed.org/graph/?g=Z12V.

But majority of high tech raised equity capital and not debt.

True, but valuations are based on future earnings potential. If the market looks down, then there is the idea that there is less revenue coming in the future, and the company has less capability to sustain a workforce.

It really is interest rates.

fair point.

I wonder how many of those tech companies that you're alluding to have evergreen provisions baked into their capital structure, and what that means from a cost of equity perspective at the prevailing risk-free rate.

Maybe smaller companies, but large ones carry a lot of debt because it’s cheap.

Google has $28B in debt.

Which they can pay all back TODAY if they want to. Not tomorrow, not in 10 years. Today. That's how much money they have in the bank.

That doesn’t change anything. The question was “do they hold debt”.

Debt has major tax benefits to it. That’s why companies who don’t really need to issue debt, do.

> the biggest expense is salaries

And this also gives these companies (and others) a reason to skip promotions and pay hikes for everyone else. This is just an excuse to exploit labor to increase profits when demand is falling.

How much money did MS make last year?

~$73B, but profits, margins, and cash on hand decreased in the most recent quarter

FAANGs are also big enough that they'll have actual econometricians working under the CFO who are producing gloomy reports about the over leveraged sectors of the economy are likely to set off detonations due to higher interest rates.

is it a rule of thumb for companies to want 5 years worth of expenses on hand as cash?

Not if the company is profitable. Even for unprofitable companies that sounds high.

It's amazing how many wrong answers there are in this thread. This is the only correct one.

Imagine you have a money printing machine. And the more people you have to turn the cranks on that money printing machine, the more money you'll make.

Then imagine the Federal Reserve comes along and says, "How would you like a bunch of almost free money?"

The logical thing to do would be to get a bunch of that almost free money and then hire people to crank the heck out of that money printing machine. So that's what they did.

And then the Federal Reserve says, "Party's Over!" and stops giving out the almost-free money. You lay off the bottom performing x% of your entire workforce.

Almost Free Money Party Starts

https://www.cnbc.com/2020/06/29/the-fed-is-buying-some-of-th...

Almost Free Money Party Ends

https://www.bloomberg.com/news/articles/2022-03-09/fed-s-big...

It's rather memetic in a way, everyone thinks everyone else knows best when it happens. Then the mimeses becomes a self fulfilling prophecy and private liquidity starts to tighten up even further than the tightening because of interest rates.

I'm guessing the decision makers here are sometimes aware of the irrationality of the snowball effect, but bet on it being irrational not to copy it before the market reality hits them and they have to make even deeper cuts in future.

Betting you're not the smartest guy in the room is not routinely wrong--especially if the action of all other other "smartest guys in the room" affects the outcome.

Yep. It's the Rene Girard Peter Thiel mimetic desire. The first outside investor in Facebook. Stanford professor. Critic of the critics of Western Culture. Jesus Christ is the one true role model. These layoffs are the apocalypse. The laid off employees are now Gods. Zero to One by Blake Masters. National Conservatism. One cut on this I always have is, these things are always over-determined.

Many tech companies made the same assumptions in the last two years (e.g. online transactions/ecommerce will stay at COVID levels). Those assumptions turned out to not be true, so they are course correcting to match the current economic climate.

Microsoft added 70,000 new employees in the last 3 years.

How much of this is course correction vs sheer cluelessness?

Yeah Microsoft is an interesting case, since they aren’t as impacted by ecommerce spending. As far as I know, they haven’t launched a completely new service/offering that would require that many people.

That might be a case of them cutting the costs to prop up the stock price so they can make acquisitions? Time will tell

Seems like “cloud” and all that goes with that. Their Azure cloud and related services, government/defense cloud business, Office in the cloud, etc.

There are couple of factors at play here.

a. With cheap money, placing and chasing risky bets was risk almost-free. Although, this has been the case for past 4years, 2021/2022 was where it eclipsed new highs. b. Wag-wars: In 2020, 2021, 2022, in SV, I have seen people getting insane offers. Sometimes accompanied by multiple expansion of stock (TSLA, NVDA). This eventually meant that if you don't pay top-dollar, someone else will and you will have to keep hiring belt burning. [presume that prospective employer finds you worthy enough]

I also find hard to believe that decision makers believed that pace of growth/expansion in 2020, 2021 was sustainable. There were signs that it isn't and cheap money kept flowing. Some would also criticize the stimulus checks but in my view, it helped folks who needed it the most but it also went on to chase risky or unproductive things like NFT etc.

/end-of-rant

The size of these layoffs are minimal in comparison with the hires they have done during the pandemic. I see this as normalization more than anything else.

Hoarding of talent!

english not me main language but it not mean me stupid. i was at two big tech company for over past 10 year.

this a massive GRIFT..saw armies of new hires. Now people on HN and LinkedIn say, "So hard to recruit this level talent. Will need to re-hire them." Oh really? Let me tell you.

i saw:

- original founders, execs, and they proteges leave, to be replaced by "Professional Managers"

- professional managers have no vision or direction.

- professional manager cares nothing for customer, product, or value.

- professional manager driven by prestige of being at big tech and ego

- only goal is to increase HC, fight territory battles, and grow empire.

- main incentive was PROMOTION.

- how to achieve promotion? Managers: empire building. IC: invent complexity, build solution to problem that not real. launch it, get promoted, go to next team. great, now we need to spend even more $$ to support some piece of shit services because critical stuff taking dependency on it. manager, Sr. Mmnager collude across organization to show big impact and get unnecessary thing entranced deep in tech stack. But hey, now we write document in promotion portfolio so sr. manager can become director.. sr. engineer become staff level..

- 20% of company provide value that pays the other 80% salary.

- Many people work on stupid thing that have no meaning for customer.

let me pick a random big tech co:

you tell me what huge improvement in amazon shopping, how alexa better, how kindle better, how fire (junk) any better? What big innovation even from aws in past 7 year? oh let me tell you – lets steal some open source project, give no credit or contribution back to main project, and sell as managed service and eat our customer in data transport cost alone.

this grift went on long time enable by cheap borrow policy. and in silicon valley, it at level of Ponzi scheme. I invest in company x,y,z, and c. i force c to use shitty SaaS products from x,y,z or some other company my friend invest in. it literally same dollar moving from x to y to z to c.

entitled grifters.

Searching for “The Gervais Principle” will give you a nice life cycle diagram for what you’re describing

Because they are all owned by the same rich people with the same world view.

Yes like CALPERS and Norway sovereign wealth fund that have to provide retirements to millions of average people. And index funds that tens of millions invest for their 401k. A falling stock market isn’t good for the average person

Google is a growth, not a value stock. They don't pay dividends.

You don't grow with fewer people who can put out fewer products.

Well they’re certainly run by lots of the same people. Article is a few years old but I’m sure the story remains the same: https://www.visualcapitalist.com/50-largest-u-s-companies-bo...

Another user said it best in the M$ thread. They're coordinating to lower salaries.

Most employees will be hired back into the industry, probably swapped between these companies... at a lower salary.

That... and culling, getting ready for the economic shitstorm.

Lawsuits will be needed. the amount of collusion is truly illegal

What do you have to sue for? Nothing atm. Only long term solution is a steady job + freelancing or side hustle

Some companies are really in financial trouble, but the others are stack ranking in their shadows: https://en.wikipedia.org/wiki/Vitality_curve

The theory by a certain Jack Welch being that the bottom 10% are "non-producers". Since they don't produce, they can simply be fired without affecting the output of the company.

And since some startups had legit trouble and laid off people because they really couldn't survive otherwise (but then typically laid off >10% or had multiple rounds of layoffs), the others can now do it without taking a reputation hit (again, in theory).

VCs seem to be pushing this heavily.

Personally, not a fan. Yes, it's legally not as easy to fire someone for low performance like it is to fire 10% because "the economy!!1", but it's also not impossible. No need to use scorched earth tactics...

Let’s see 5.5 million workers in tech and 200k get laid off that makes less than 4% of jobs lost. Considering securities took a way bigger haircut, I don’t see what the concern is about.

Losing your job is a binary event, you have the job or you don’t. It’s not much of a comfort to someone who has been laid off that stocks are doing worse.

But the number of H1B visas is NOT decreasing and the big tech companies that own the advertising platforms continue to whine about talent shortage. It’s a farce to reduce their costs by flooding the market with cheap labor.

A lot of different explanations here and they're probably all true as it is a combination:

1. Interests going up means less economic activity (at least how our current financial system is setup) 2. Everyone else does it, so you can trim down without stigma. 3. We are hitting an economic recession and the companies remember how bad times can go so they want to prepare.

A more cynical thing is, as we are hitting this economic troubles ahead, things will most likely get cheaper. If Google have more money they can buy more of their competitors and ensure to bigger marketshare for cheaper.

Interest rates going up means higher interest rates on debt service. As commercial loans hit their maturity dates and those interest rates hike up the entities which have been barely skating by on low short term rates will be pushed into liquidation. Those failures will spill over into risk of contagion in the financial markets as we find out who has been underwriting bad loans this time.

And yes "crisis brings opportunity" and its likely going to be a very good buying time for those with cash on hand near the bottom. Those who have burned up their cash will not get a seat when the music stops.

Exactly my thoughts but said a lot more eloquently.

The most famous tech companies are constantly trying to outdo each other so when one is forced to do cuts, the others try to have a bigger cut. Midsize companies see this and realize that, while they can't play at the same scale, they can look cool too by following suit. Small companies look at this and realize it's an opportunity to finally get the staff that wasn't available before. And while the process is disruptive to lives and productivity, those small companies grow just a bit more competitive with their bigger brethren.

So it's some grand conspiracy that companies are doing mass layoffs as their stock prices drop, but not when they do mass hiring as their stock prices artificially inflated?

What happened to basic logic here?

A) To optimize the company’s stock price, earnings, and/or C-suite bonuses.

B) To liberate the workers from wage slavery.

C) It feels good to do this in your soul.

D) There’s no such thing as bad publicity.

I’m leaning towards A?

All of the above, plus:

E) We f*cked up and hired too many so we'll blame it on the economy.

I think the Salesforce number is the number from 2023 and excludes the 1000 from 2022

https://www.cnbc.com/2022/11/08/salesforce-cut-hundreds-of-e...

Increased shareholder pressure.

Chance to reset salaries within the company without losing out much on the market (doing layoffs in a similar time frame with others will pretty much leave you with options when you all start hiring again)

Showing the whip to their remaining work force, as the power dynamic becoming even slightly more equal is unthinkable.

"Conpanies overhired during the pandemic."

Where did all those people come from? Was there huge unemployment before?

I suspect that it's an attempt to spread panic and get the "good employees" to accept a salary / benefits reduction in fear of going jobless. VCs demand more profit so a new way to reduce salaries must be found.

I think the better question is

if you look at pre-2020 mass hiring spree headcounts

how many more layoffs approximately need to be done until we’re normalized?

1 mass 10k layoff at 5-7% of workforce: not terrible

1 mass 10k layoff every quarter for the next 4 quarters: probable or not?

Because they added too many people. From end of 2019 they added

Google (through September 2022): 68k

Microsoft (through June 2022): 77k

Amazon (through December 2021): 310k

Meta (through September 2022): 52k

Salesforce (through January 2022): 39k

Most of the layoffs in these places is coming in HR and sales.

This layoff in my opinion will create one of the biggest startup revolutions (similar to 2008) in history. This number is just huge and we will see the effect in 2024 IMO.

One is because they can. Personally I think many are using the economic downturn to fix over zealous hiring during and after COVID.

The Street expects companies to cut costs in a bear economy and there is no greater saving to this than a RIF.

Cause recession? Money is suddenly tight?

But google, Microsoft, etc have $200bn on their balance sheets!

Rule of Acquisition #10: Greed is eternal. [1]

The shareholders always want growth and profits.

[1]: https://memory-alpha.fandom.com/wiki/Rules_of_Acquisition

And? You think they want to lose that?

There's comfort in the crowd. There's little to no reputation hit for a company to do layoffs now.

Who is everyone?

Why do companies that are known for being overly bloated mean anything for the rest of the economy?

Google, Microsoft, Amazon, Meta, Twitter, Salesforce

For large US software companies, it's basically everyone.

copy the celebrity.

senior management being replaced by ChatGpt?

Beginning of 2022 or 2023?

Because of the global economic meltdown, which we're in the early stage of.

Why don't you know this?

the white collar labor market is being shorted in real time

senior management gonna hire ChatGpt?

Mimetic desire

At this moment central banks worldwide are increasing interest rates to slow down economies and fight inflation caused by money printing during COVID (different countries might be in different parts of their tightening cycles tho).

As a company, if you believe there will be less economic activity in the future, you must cut costs to ensure survival.

Of course one could bet central banks will fail, but historically this sort of bet has held nothing but pain and suffering.

Love him or hate him (I'm more the latter at this point) Elon showed you could trim 70% of the workforce from Twitter and it's still up and running. So with that logic, that being on the extreme side, trimming some smaller % is a no brainer to the boards of most companies now.

twitter is an order of magnitude less than FAANG. at the end of the day, they're mostly a text-based feed. also aren't they not paying rent

They have been sued for not paying rent, for going back on severance package, just sold office equipment to make for the losses.

Twitter still runs due to fear in others of losing their job in these tough times. If the market was as great as before, no Twitter employee would agree to work 10+ hours or weekends, or sleep in office.

Counting eggs before they hatch are we?

How much of the remaining workforce at Twitter is held hostage by a work visa? (I don't know, I am asking the hive though)

So companies that offer work visas are kidnappers?

The people that want to come over and accept the job offer are aiding in their own kidnapping?

I don't get it, you don't support work visas or you think Twitter is abusing them, or...?

I have so many questions about your statement.

you have 60 days to get a new job or move to some b1 visa. abs not stressful for people when you see the current market.

that's true for any company that offers work visas.

you know that when applying, accepting, and relocating.

so all of my questions to the GP still stand.

what is the suggested change or even the specific complaint?

are all companies with visa workers holding their employees hostage?

or did they give them an opportunity they otherwise would not have?

twitter is dying...it's like a soggy sandwich....edible...sorta...for now

> it's still up and running

If the rumors are to be believed, revenue has cratered. At the very least, the quality of ads has steeply declined - from A tier brands to B and C tier ones.

Perhaps eviscerating the sales and content moderation teams was not a genius 11-d chess move?

Aren't those same brands cutting jobs and trimming advertising everywhere?

Give it another year. Rumor mill is that many are silently seeking new jobs. The site is in a slow decline right now, several journalists talking about the weird consistency bugs they are encountering.

I suspect that with some time the people who are left there will burn out from the maintenance load due to the 70% cuts. Elon should have been more empathetic when cutting people, to not burn the good will of everyone who was left imo.

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